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AD: The abbreviation for aggregate demand, which is the total (or aggregate) real expenditures on final goods and services produced in the domestic economy that buyers would willing and able to make at different price levels, during a given time period (usually a year). Aggregate demand (AD) is one half of the aggregate market analysis; the other half is aggregate supply. Aggregate demand, relates the economy's price level, measured by the GDP price deflator, and aggregate expenditures on domestic production, measured by real gross domestic product. The aggregate expenditures are consumption, investment, government purchases, and net exports made by the four macroeconomic sectors (household, business, government, and foreign).

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Lesson 10: Utility and Demand | Unit 2: A Simple Choice Page: 7 of 21

Topic: Unit Review <=PAGE BACK | PAGE NEXT=>

In this unit, you should have learned about:
  • How the total and marginal utility derived from consuming a good affects the quantity consumed.
  • How a buyer will consume the quantity of a good that generates the highest possible level of utility if not constrained by prices and income.
  • How constraints imposed by prices and income prevent a buyer from consuming the highest possible level of utility.
  • How changes in the price of a good cause a different quantity of a good to be consumed that generates a different marginal utility.

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SELF CORRECTION, AGGREGATE MARKET

The automatic process in which the aggregate market adjusts from short-run equilibrium to long-run equilibrium. Self-correction results through shifts of the short-run aggregate supply curve caused by changes in wages (and other resource prices). The self-correction mechanism acts to close both recessionary gaps and inflationary gaps. The short-run aggregate supply curve increases (shifts rightward) due to lower wages to close a recessionary gap and decreases (shifts leftward) due to higher wages to close an inflationary gap.

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APLS

PURPLE SMARPHIN
[What's This?]

Today, you are likely to spend a great deal of time at a crowded estate auction wanting to buy either a New York Yankees baseball cap or several magazines on home repairs. Be on the lookout for letters from the Internal Revenue Service.
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This isn't me! What am I?

Okun's Law posits that the unemployment rate increases by 1% for every 2% gap between real GDP and full-employment real GDP.
"An idea is never given to you without you being given the power to make it reality."

-- Richard Bach, Author

AD
Aggregate Demand
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